Is wax paper a restaurant buys to microwave-heat sandwiches on exempt as a manufacturing item, or taxable because it's really used to store or separate food?

Plain-English summary

This letter is an internal Comptroller auditor's inquiry, restating an earlier October 16, 2000 response about wax paper purchased by a restaurant chain operating sandwich shops inside travel stops. The auditor had originally discussed the wax paper's use with the taxpayer, who said it was not given to customers but used to separate servings of meat, for sandwiches, or for storage. The auditor initially treated the purchase as taxable because the paper wasn't used to wrap or cover take-home or eat-in items for customers. A consultant on the audit later argued the wax paper was instead used in manufacturing — specifically, that food product sits on the wax paper while being heated in a microwave.

The Comptroller's response drew a functional line: wax paper used in preparing, warming, or reheating food for sale is exempt (as an item consumed in the manufacturing/food-preparation process), but wax paper used to store food is not exempt. If the same wax paper serves both taxable and exempt purposes, the restaurant needs documentation showing the exempt-use portion — the letter cross-references an earlier STAR ruling (accession # 9911843L) on the same documentation requirement.

What this means for you

Restaurants, sandwich shops, and food-service operators

Whether a food-prep consumable like wax paper is exempt turns on its actual functional use, not its generic description as "packaging" or "supplies." Using it to warm or reheat food for sale can qualify it for the manufacturing-type exemption; using the same item to store or separate food does not.

Multi-location or franchise operators with dual-use supplies

If the same consumable item serves both an exempt use (warming/reheating for sale) and a taxable use (storage) across different locations or situations, keep records that let you document the split — otherwise, expect an auditor to treat the whole purchase as taxable absent that proof.

Auditors and tax professionals

This letter models the Comptroller's standard approach to dual-use consumables: functional-use classification plus a documentation requirement for split uses, rather than a blanket rule based on the item's category.

Common questions

Q: Is wax paper always exempt for restaurants?
A: No — only when it's actually used in preparing, warming, or reheating food for sale. The same wax paper used for food storage is taxable.

Q: What if a restaurant uses wax paper for both warming food and storage?
A: The restaurant must maintain documentation reflecting the exempt-use portion, or risk the purchase being treated as fully taxable.

Q: Does giving the wax paper to the customer (e.g., wrapping a to-go sandwich) matter?
A: The auditor's original view treated non-customer-facing use (not used to wrap/cover take-home or eat-in items) as a factor pointing toward taxability, but the final answer turned on the warming/reheating-vs-storage functional distinction, not customer handoff alone.

Q: Can any restaurant rely on this exact answer for its own wax paper purchases?
A: Not directly. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own functional use and documentation with a tax professional.

Citations and references

Related STAR guidance referenced in this letter:

• STAR accession # 9911843L (documentation requirement for dual taxable/exempt use)
• STAR accession # 9507L1361A04 (prior interoffice memo referenced by the requester, not directly addressing wax paper)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200010795L

Original ruling text

October 24, 2000

Wanda Smith
[email protected]

Subject: Wax Paper Purchased By A Restaurant

Dear Ms. Smith :

This is to restate my October 16, 2000 response to your e-mail inquiry
concerning the taxability of wax paper purchased by a restaurant. Your fact
situation and question are restated below followed by my restated response.

I have a taxability question that I would like your opinion on. I read your
interoffice memo on STARS (9507L1361A04) and it did not directly state anything
about wax paper purchased by a restaurant. I discussed the use of the wax paper
with the taxpayer originally and she stated that it is not transferred to the
customer, but she felt it was used to separate servings of meat, for
sandwiches, or storage. (taxpayer owns **** sandwich shops, which are
located within their travel stops).

I felt it was a taxable purchase, since it was not used to wrap or cover take
home or eat in items for customers. I now have a consultant involved with the
audit and he is stating that the wax paper purchased is used in manufacturing.
He states that product sits on it in microwave. Is the wax paper taxable or
an exempt manufacturing purchase.

Response: If the taxpayer can show that the wax paper is used in preparing,
warming or reheating food for sale, wax paper used in that manner is exempt.
Wax paper used to store food is not exempted. If the wax paper is used for
both taxable and exempt purposes, the taxpayer will need to maintain
documentation reflecting the exempt use. See STAR accession # 9911843L.

Tax Statutes, Rules, and Publications are available at
http://www.window.state.tx.us/.

The State Tax Automated Research System, which provides viewing and downloading
edited letter rulings, hearings, AG opinions, etc., may also be accessed
through our website at http://window.state.tx.us/.

This opinion is based on the facts presented. Other facts though similar may
provide a different result. I hope this information answers your questions.
If you need additional information, You may e-mail our tax help section at
[email protected]. You may also call me toll-free at 1-800-531-5441,
extension 3-4502. The direct line is 512/463-4502. You may also write to Tax
Policy Division, Comptroller of Public Accounts.

Gilbert Zamora
[email protected]
Tax Policy Division